UBS reiterated its "sell" recommendation for BT Group PLC (LSE:BT.A) and its 110p price target, citing concerns over rising competition and pressure on the company's revenues.
In a research note on Wednesday, the Swiss bank highlighted the challenges the telco faces from alternative network providers (altnets) offering lower wholesale prices, which could put further strain on its broadband business through its Openreach division.
It believes this could significantly impact BT’s revenue and profit margins in the coming years.
According to UBS, one of the major risks is the increasing competition from companies such as CityFibre, which has been expanding its fibre network at a lower cost, putting pressure on BT’s pricing.
The bank noted that Sky’s deal with CityFibre could further weaken BT's market position, potentially leading to a loss of high-margin wholesale revenue from major customers. UBS estimated that BT could lose up to £240 million annually in revenue as CityFibre expands its footprint.
It also pointed out that BT’s plans to accelerate its fibre rollout may face further risks due to this heightened competition, which could make it difficult for BT to maintain its market share and pricing power.
Additionally, broader market challenges, including weaker demand for broadband amid rising inflation and cost-of-living pressures in the UK, could weigh on BT's growth outlook.
As a result of these factors, UBS lowered its expectations for the company's earnings in the coming years and remains cautious about the company’s ability to navigate these challenges effectively.
In morning trade, the stock was flat at 140.85p.